$30 Billion Time bomb ready to go off

admin — Mon, 21 Sep 2009 20:41:31 +0000

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I have been of the opinion, that our next wave of problem mortgages will be the option ARMs. Here is a situation where many homeowners took a chance at a gamble and failed; and the bill is coming due very soon with most being unable to meet their obligations. If this is not a recipe for disaster, I don’t know what is…….. None of these homeowners will be eligible to re-finance these loans, so their future is laid out for them already.

Finally some hard data for the Bay Area has been revealed. Between 47,000-57,000 loans with a value of $28 – $31 Billion in option ARMs are located here in the Bay Area. The bulk of these are set to re-cast between 2010 – 2012. Here are some additional details.

Metropolitan statistical area	% of all home loans originated 2004-08 that were option ARMs	% of 2004-08 option ARMs that are 60-plus days delinquent or in foreclosure
San Francisco-Oakland-Fremont (San Francisco, Alameda, Contra Costa, Marin, San Mateo counties)	19.52%	27.23%
San Jose-Sunnyvale-Santa Clara (Santa Clara and San Benito counties)	19.32%	28.36%
Santa Rosa-Petaluma (Sonoma County)	25.31%	24.94%
Vallejo-Fairfield (Solano County)	28.12%	36.91%

$584,000

Average option ARM loan in 5-county S.F. metro region

54,000

Number of option ARMs in Bay Area

$30.9 billion

Bay Area option ARM loan balance

Source: First American CoreLogic

94%

Borrowers who make minimum monthly payments

79%

Average loan-to-value ratio when loans were made

126%

Average loan-to-value ratio now

39.3%

Option ARM borrowers who are 60+ days delinquent

San Jose Short Sale Agent: Silicon Valley Foreclosure Prevention Specialists » bay area

$30 Billion Time bomb ready to go off